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Prospects for Chile-Korea relations: a turning point for economic integration?

Daniel A. Feitosa Lopes, Stockholm University

This paper focuses on the effects trade liberalization in Latin America and East Asia taking into account the recent Free-Trade Agreement signed in 2003 between Chile and Korea as a case study. Korea has experienced a history of success dealing with Asian Regionalism on trade in terms of ASEAN countries but the efforts towards Latin America are still uncertain. On the other hand, Chile is often called one of the most opened economies in the world and has been benefited from a well developed social and economic system and since 1996 has started several trade agreements with countries around the five continents, this aggressive approach is due to its reliable political stability and solid economic structure based on copper and other manufactures. The two countries are divided not only by geographic distance, but a disparity in economics, politics, culture and history. The paper first introduces a literature review analyzing the economic development paths of Chile and Korea for a sustainable growth route. Analyzing the economic consequences of Korea-Chile FTA after six years of implementation with structural breaks methodology, a mainstream econometric tool, we can infer that the FTA has indeed changed the flow of trade, with different valence among export and import goods. A Korean expansion in the region given these results shall follow a very asymmetric strategy.